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The fund was built on the country’s revenue from oil and gas production, but Norway is taking a leading role on responsible investment

13 May 2020 - 14:22 Stephen Treloar and Mikael Holter

Picture: 123RF/TOMAS1111

Oslo — Norway’s $1-trillion wealth fund is doubling down on its climate action by making deeper cuts to its fossil fuel exposure.

The exclusions span some of the world’s biggest coal miners and make use of climate rules for the first time to exit oil-sands firms. Glencore and Anglo American, utility RWE and Canadian oil producer Suncor Energy are among those hit by withdrawals that amount to about $3.3bn based on Bloomberg calculations using the fund’s reported holdings at the end of last year.

The move had been eagerly awaited by environmental activists after Norway tightened the fund’s restrictions on investments in thermal coal last year, closing what critics had described as a loophole to continue funding polluters.

Oil stocks

Norway’s fund, which owns about 1.5% of listed stocks worldwide, was built on the country’s revenue from oil and gas production. It has sought to take a leading role on responsible investment, with ethical guidelines spanning from a ban on tobacco and some weapons to restrictions tied to human rights and environmental issues.

The central bank, which manages the fund, even argued for a full exit from oil stocks to reduce Norway’s exposure to oil-price risk. But the proposal was watered down by the government last year, sparing the world’s biggest oil producers.

The new coal exclusions come after the government introduced absolute caps on thermal coal. Earlier iterations of the rules excluded companies that got more than 30% of their activity or income from coal and missed some of the biggest producers and users in the world.

The latest exclusions also capture Sasol and AGL Energy, Norges Bank Investment Management said in a statement on its website. It also placed BHP, Vistra Energy, Enel and Uniper under observation.

Anglo’s exclusion comes as it plans to exit its biggest thermal coal business within the next three years by spinning off its SA operations. The company has spent decades positioning itself as an environmental and social champion, but it has risked getting left behind on thermal coal, after Rio Tinto sold its last coal mine in 2018.

Canada, Brazil

Norges Bank’s executive board also decided to exclude Brazilian iron-ore giant Vale in line with its rules on environmental damage, following repeated dam breaches that killed hundreds of people, as well as the country’s utility Eletrobras on the risk of human rights violations. It also excluded Egypt’s ElSewedy Electric.

Other oil producers affected were Canadian Natural Resources, Cenovus Energy and Imperial Oil.

Norway’s wealth fund struggled to offload the shares of some of the excluded companies, saying that for several of them, the market situation, including the liquidity of individual shares, meant that it took a long time to sell the shares “in a reasonable manner”.